AMERICANS RANK DENVER AS TOP CITY

Short, interesting article today from Reuters which says Americans have ranked Denver as the top city in country in which to live.

San Diego was second, followed by Seattle.

The survey was based on interviews in October with 2,260 people in all 50 states.

If you're thinking of moving to Denver, call me! (Knew there had to be a plug in there somewhere, didn't you?)

CASE-SHILLER RANKS DENVER MARKET #2

A prominent theme in yesterday's economic outlook presented by Dr. Ted Jones was that "all real estate is local". Common sense, but often forgotten.

We are impacted by national events.

But we are also cushioned by the relative strength of our own local economy.

I have said in buyer presentations for the past 18 months that Colorado is on the backside of its foreclosure crisis. It came early (2004) and it was severe, but because we went into first, we're coming out of it before the rest of the country.

Two pieces of supporting evidence:

1) The number of foreclosures in the seven-county Denver Metro area last year was 24,650, down from 26,521 in 2007. That's a decline of more than 7%. In California, there were over 236,000 foreclosures last year, an increase of 180% from 2007. When your appreciation dies off, the foreclosures begin. Our market topped in 2004, whereas many markets didn't hit the skids until 2007.

2) The widely-followed Case-Shiller home price index was released yesterday, and Denver ranked as the #2 market in the country, behind only Dallas. According to Case-Shiller, home prices in the Denver region lost 4.3% of their value from November of 2007 to November of 2008. Dallas and Denver were the only two markets with losses of less than 5%.

While a 4.3% loss may not be cause of celebration, I remind my investor clients often that it beats a 40% loss in the stock market. And while some homes may have lost some value, my investors continue to see positive cash flow and my first-time buyers continue to pay less on a mortgage that they would in rent.

These are uncertain times, and as I said yesterday, that's why interest rates are the lowest they have been in almost 50 years. When confidence returns, prices will rise, and so will rates. It's always been that way, and that cycle will surely play out again.

AN ECONOMIST'S VIEW OF THE 2009 COLORADO REAL ESTATE MARKET

Here is the text of an email I sent out to my database earlier today. Hope you find it of interest!

January 27, 2009

Good afternoon:

This morning I had the privilege of attending a 2009 State and National Economic Forecast meeting featuring Dr. Ted Jones, a nationally recognized real estate research expert who is senior vice president and chief economist for Stewart Title Company. Formerly, Dr. Jones was chief economist at Texas A&M’s Real Estate Research Center, the nation’s largest publicly funded real estate research organization.

In a diverse and wide-ranging discussion of the Colorado economy, Dr. Jones made a few points I thought I would share with you.

While the nation is most definitely in a recession, and a severe one at that, Colorado’s fundamentals remain better than most states in the country.

Because there was not a speculation-driven “bubble” in Colorado home prices between 2000 and 2005, we are not seeing anything like the corrections taking place in California, Arizona, Nevada, and Florida.

Unemployment rates should be at least a full percentage point lower in Colorado than the nation as a whole throughout 2009.

Lower oil prices are temporary, in Dr. Jones’ opinion. In fact, he fears we may see gasoline at $5 per gallon (!!) within 2-3 years.

Interest rate right now are artificially and temporarily low, in Dr. Jones’ opinion. With an $800 billion stimulus program working its way through Congress (and possibly even more to follow), Dr. Jones sees a short term injection of confidence and capital back into our economy, but the price will be significantly higher interest rates (he is predicting the mid 7’s on 30-year fixed-rate loans within 18-24 months - over 2 full percentage points higher than where rates are today).

What this means…

Well, we all know that we are living in volatile times. Expect that to continue for a while.

When it comes to purchasing big ticket items like homes, emotion and psychology play a huge factor in the overall health of the market. People are reluctant to take on large financial commitments when they are operating from a place of fear, and one of the primary objectives of any stimulus plan to come out of Washington will be to change how people feel as well as provide some short-term economic relief.

Based on Dr. Jones’ presentation, it seems likely that higher mortgage rates will be unavoidable in the future. Whether that shift happens in three months, six months or a year will depend on how people react to whatever help comes out of Washington.

Right now, confidence is low. So are interest rates. There is a direct relationship between consumer sentiment and how low a return investors will tolerate on mortgage-backed securities. When confidence returns, rates will rise. And that rise may well be tied more to how people feel than whether or not the economy is actually getting healthier.

So watch consumer sentiment. In reality, the stimulus package being debated right now may actually be more of a psychological stimulus package than a true financial stimulus package, even though its cost to taxpayers is unprecedented.

I’ll be discussing Dr. Jones’ presentation in more detail this upcoming Thursday night at 7 p.m. at the Arvada Public Library as part of my Home Buyers Workshop series. If you or someone you know is thinking of buying or selling a home in 2009, I would love to discuss this information with you in more detail.

In the meantime, if you have any questions at all, please don’t hesitate to give me a call.

Have a great week,

Dale Becker

RE/MAX Masters

(303) 416-0087

MORE INTEREST RATE JITTERS

Sometimes you gotta go out on a limb...

I said a month ago I was concerned about inflation and higher rates, and nothing has changed that opinion. After briefly touching the high 4's last week, 30 year fixed rate are back into the 5's this week (still AMAZING!) but the market is jittery, to say the least.

Here's the dilemma:

If the economy deteriorates further, rates will likely fall as investors seek the "safe haven" of mortgage backed securities.

If the economy improves (or gets a massive, artificial injection of stimulus from the federal government), money will fly out of bonds (which dictate interest rates) and into the stock market. If no one is left to buy bonds (because other investments look better), the yield must rise, which means higher interest rates.

So which will it be? Great Depression 2, or the Trillion Dollar Money Bomb?

It seems to me that we are undeniably just a few weeks away from the biggest federal intervention in the US economy in our nation's history. The printing presses are running even now, and once that money (and those jobs) begin flowing out into the economy, there will be a different psychology altogether.

Right now people are scared. They are looking for a bottom, looking for certainty, looking for some guarantee that things are going to get better.

That is the reason why 30-year interest rates are at 5.00%!

When the psychology changes - and it will - our interest rate environment will change as well. And even if rates bounce back up to 6.00% - which they will, sooner or later - your purchasing power will probably never be greater than it is today.

Consider the following scenarios:

$200,000 loan at 5.00% = $1,074 per month

$180,000 loan at 6.00% = $1,079 per month

If (when) rates go up 1.00%, you have just lost 10% of your purchase power.

A $400,000 loan today at 5.00% carries the same payment as a $360,000 loan at 6.00%. Do you see what happens if you choose to "wait things out"?

Now, there's one segment of the market I won't pitch this idea to, and that's the high end ($500,000 and above)... and that's because I see in the numbers some trends that are very concerning to me right now. If this is your situation, we need to have a separate conversation.

But for the vast majority of buyers, the combination of low prices and low payments should be incredibly compelling.

If I was considering purchasing or refinancing a home right now, and rates mattered to me, I would not wait.

FIRST 2009 HOME BUYER'S WORKSHOP COMING UP NEXT WEEK

Just a quick note to let you know my next Home Buyer's Workshop will be one week from Thursday at the Arvada Public Library.

On Thursday evening, January 29 at 7 p.m., I'll be hosting a talk called "What Will Happen With Housing in 2009?".

Here are some of the topics we'll discuss:

· What else can (or will) the government do to prime the housing market in 2009?

· How long will interest rates remain low?

· Why has active inventory fallen by over 20% in the past year?

· What will be the next "shoe to drop" in the foreclosure crisis?
· Are the number of foreclosures going up or coming down?

· Why are over 70% of all sales right now below $250,000?

The program will run about 90 minutes and I'll be joined by Christine Jensen from Cherry Creek Mortgage. We'll have light snacks and plenty of good information.

Please call or email to RSVP - and if you have a friend or family member who would like to attend, please let me know so that I may invite them personally.

I look forward to seeing you next Thursday night in Olde Town Arvada!

COLORADO GETS $53 MILLION IN HUD FUNDS TO BUY FORECLOSURES

Governor Bill Ritter yesterday received $34 million from the U.S. Department of Housing and Urban Development earmarked for the purchase and rehabilitation of foreclosures in Colorado. The money was allocated as part of the "2008 Housing and Economic Recovery Act" bill which was signed by the President last summer.

An additional $19 million in funds has already been allocated to Denver, Aurora, Adams County and Colorado Springs, bringing HUD's total investment in Colorado to $53 million.

Now the fun part - what will be done with the money? Who will do it? And when will it be done? And oh yeah, who's watching it?

If the money is used to purchase blighted foreclosures - and there are plenty in need of so much work that neither investors nor first-time buyers will touch them - it will be interesting to see how this new program impacts inventory. Will the government agencies flip them? Keep them as rentals? Do lease-to-own programs?

By my calculation, the state and its local governments could purchase about 350 homes this year in the $150,000 price range, or 700 homes if they aim to clean up the most distressed inventory at the bottom of the market. This is not inconsequential, and it will be worth following to see how a large, deep-pocketed government agency uses its resources in 2009.

With only 2.36 current active listings for every home already under contract in the sub $250k price range, it's possible that we could see low end inventory tighten up even more as the year moves on.

PMI GROUP SAYS "LESS THAN ONE PERCENT" RISK OF FURTHER PRICE DECLINES IN DENVER

It might be too late to save The Rocky Mountain News, but at least they published a positive article on the way out the door.

METRO HOUSING HOLDING ITS VALUE

Don't know how long this link will stay up, but enjoy it while it's there.

And to see the complete PMI forecast which puts the likelihood of further price declines in Denver at less than one percent, click HERE.

STATE OF THE MARKET - PART 3

A study by Relocation.com reports this week that Denver is the second best projected relo market in the country for 2009, behind only Las Vegas. It's the second straight year Denver has been ranked as a top five relocation market, and it's due in large part to relatively affordable housing, an economy that's decidedly stronger than the nation's as a whole, and a great quality of life.

The study ranked metropolitan areas with a population in excess of one million. Other top five citites for 2009 were Charlotte, Phoenix and Portland.

Relocation.com analyzed nearly 500,000 moving quote requests from 2008 in arriving at its list for 2009. About 14% of those requests involved out-of-state moves, according to the company.

As an interesting sidebar, the Denver Post ran a story this week on people leaving California and moving to Colorado. You can check it out here. Note that there are over 250 comments on this story, and counting.

That there's this much energy around the subject shows that people have strong feelings on both sides of the population growth issue. The fact is, however, that we are growing, people are attracted to Colorado, and that continued migration into the state over time will strengthen both the housing and rental markets.

STATE OF THE MARKET - PART 2

Let's take a look at absorption rates as they exist in our market today.

Absorption rates, for those who don't live and breathe real estate, is a calculation which measures "how long it would take to sell all homes on the market today at the current pace of sales". The technical calculation is the number of active listings today divided by the number of homes which went "under contract" in the past 30 days.

Here are current absorption rates, by price points:

$0 - $250,000: 4.22 months

$250,000 - $400,000: 12.66 months

$400,000 - $600,000: 18.23 months

$600,000 - $1 million: 41.40 months

$1 million and above: 67.08 months

Obviously, this is not a pretty picture for most segments of the market. The only area with any resilience right now is the sub-$250k market, which is mostly driven by discounted foreclosure inventory.

The stock market collapse last fall sent a chill over the traditional resale market. People instantly pulled back, became more cautious, and are waiting to see which direction things go under the new administration. The only area which wasn't really affected was the low end of the market, where investors and first-time buyers continue to compete for discounted properties.

So let's take a look at how absorption rates changed between October and January.

$0 - $250,000: 3.77 months to 4.22 months, an 11% increase
$250,000 - $400,000: 8.82 months to 12.86 months, a 46% increase
$400,000 - $600,000: 14.72 months to 18.23 months, a 24% increase
$600,000 - $1 million: 34.58 months to 41.40 months, a 20% increase
$1 million and above: 56.43 months to 67.08 months, a 19% increase

Turns out the softest spot in the market over the past three months is the $250,000 to $400,000 range, and it's not even close. This is where the fear is greatest in our market.

Whether you are a buyer or a seller, you need to know this piece of information.

STATE OF THE MARKET - PART 1

Over the next few days, I thought we'd take a look at some statistical components of our market.

Although overall active inventory is down over 20% from one year ago (a good thing), understanding what that actually means is something different.

Here's a look at the ratio of active homes on the market to properties under contract in a selection of price ranges:

0-$250k: 2.36 homes on the market for each one currently under contract

$250k - $400k: 7.13 homes on the market for each one currently under contract

$400k - $600k: 10.30 homes on the market for each one currently under contract

$600k - $1 million: 18.61 homes on the market for each one currently under contract

$1 million and above: 31.64 homes on the market for each one currently under contract

When you consider that two-thirds of the traffic your home is likely to receive will occur in the first 30 days on the market, can you see how important price and condition are to getting the result you want?

Terrifying statistic, courtesy of Lon Welsh: last year, over 50% of all homes listed for sale in the Denver MLS did not sell. They were withdrawn, expired or (worse case) foreclosed upon.

Deciding to List vs. Committing to Sell

DECIDING to LIST your home for sale is NOT enough. You must COMMIT to SELLING it, and that means focusing on price and condition. It's a beauty contest and a price war. And it takes marketing to attract buyers.

If you're thinking about selling in 2009, let's talk. I offer my sellers a 71-point marketing plan that ensures their homes will be seen where buyers are looking for them. Over the past two years, my listings have sold in an average of 44 days, when the market average was over 100. You must understand the market you are in, you must price them right, and you must promote your properties where buyers will see them.

BY THE NUMBERS: FAST FACTS ABOUT THE TOP 100 REAL ESTATE COMPANIES

Courtesy of Mariwyn Evans at REALTOR Magazine, here are some interesting facts and figures about the Top 100 Real Estate Companies in America for 2008...

20: Companies with gains in sales volume
17: Companies with gains in transaction sides
7.3: Average number of sides per associate
13.8%: Decline in average number of transaction sides
6.1%: Drop in average number of sales associates
2.4%: Drop in average number of offices
10.1%: Decline in average sales volume

Here's an interesting piece of data: while 80% of companies in REALTOR Magazine's Top 100 saw a decline in overall sales volume, these companies only lost 6.1% of their agents. Estimates nationally are that between 35 and 50% of licensed agents will leave the business when their licenses expire, based on current trends.

The takeaway is this: the best agents are with the best companies.

RE/MAX agents are involved in more than 30% of all real estate transactions in the state of Colorado, and agents in my office average more than 13 years of experience.

In tough times, the brand matters. Experience matters. And the REALTOR Magazine Top 100 survey bears this out.

BUILDER INCENTIVES A THING OF THE PAST?

For years, builders have used "incentives" to persuade customers to use affiliated mortgage and title insurance companies. These incentives, which can total thousands of dollars, can include closing cost credits, design center upgrades, or discounted interest rates on mortgage loans.

The practice has been controversial for some time, and with the housing market in deep distress, regulators are coming down hard on anything that could inflate the purchase price of homes.

Federal housing regulators have agreed to delay for 90 days implementation of a rule change that would bar home builders from offering consumers incentives when they agree to use builders' affiliated mortgage and title insurance companies.

The new rule -- one of many changes to the Real Estate Settlement Procedures Act (RESPA) being phased in by the end of the year -- was set to take effect January 16.

The National Association of Home Builders sued the Department of Housing and Urban Development on December 22, saying the rule change arbitrarily applies to affiliated businesses operated by home builders. Affiliated businesses formed by settlement services providers like title insurers would still be allowed to offer discounts and settlement services packages.

In justifying the change, HUD said home builders were offsetting the cost of incentives such as home upgrades by charging a higher interest rate, increasing a home's price, or inflating closing costs. Rather than being true incentives or discounts, HUD said, such offers actually amount to penalties imposed on consumers if they choose not to use the builder's affiliated lender or title insurer.

WHAT'S IT GONNA TAKE IN 2009?

WELCOME TO 2009!

The deals are out there. But there's a lot of "fool's gold" in the market as well, and you must be able to discern between the good, the bad and the ugly.

So how do you find the real thing? Patience, persistence, and a little luck.

Are you thinking it's time to get serious about buying a home in the Denver area? Here’s what you can expect to find as we kick off 2009...

* 30-year fixed rates in the 5's - historic and (I believe) temporary

* Bidding wars over the best deals priced below $250,000 - private party or REO.

* A slower market up to $400,000, increasingly sluggish up to $600,000, and just about totally dead at price points north of that.

* Private-party sellers who continue to be in denial about the impact foreclosures and the stock market crash have had on their values.

* Short sales that look pretty behind the glass, but rarely close.

* REO's that run the spectrum from well priced in good condition to poorly priced in terrible condition.

Obviously, there are a lot of "wrong" choices for buyers on the market today. So how do you find a good property at an attractive price?

Here are a couple of strategies that might help.

Be Willing To Wait - One lender’s current policy on their REOs is to accept no offer below list price for the first ten days of the listing. Regular sellers tend to react the same way. You regularly hear about sellers who get a good offer during the first week of their listing, only to blow it off, and then regret it later.

If you want a discount off the list price, you’ll probably have to wait them out. (This also means you are going to lose some properties, though.) A good rule of thumb is about 1% per week. If you want it for 10% less, wait 8-10 weeks. It takes that long for the sellers to come to their senses. But remember that, even then, it only works if the seller has enough equity to sell and bank-owned listings that sit on the market that long normally have serious issues.

Look at the Higher-Longers - If you are interested in a private-party resale (which will normally be in better shape than REO inventory), understand that a lot of sellers are tired, frustrated and losing faith. When I take listings, I talk with my sellers about the fact they have "one shot at the parade" - in other words, listings get the most attention in the first 21 days they are on the market. After that, it can be a long, slow slog before an offer comes along.

Negotiate Later - I call this "double negotiation", and it's a common tactic in a buyer's market. Round one is presenting a clean offer and negotiating on price. Round two comes after the inspections, when we negotiate repairs, credits and concessions to keep the deal together. The fact is that, under the Colorado real estate contract, the Inspection Notice allows us to renegotiate based on the condition of the home. Of course, a buyer's emotional attachment to a property goes a long way toward determining whether this is a viable tactic, but it's one I put on the table because I am here to aggressively protect the interests of my buyers.

Last week, I closed on one of the most complicated deals I have negotiated in a long time - and the seller was a bank. We literally obtained thousands of dollars in "11th hour" repairs in unbelievably short time frames.

The common perception is that banks are selling ‘as-is’, and no repairs or credits are possible, but I am finding more and more flexibility as banks see their inventories (and losses) rise.

In no way am I guaranteeing that banks will open the vault to save a deal, but I'm seeing a lot more openness to discussing it. But you have to ask, you have to be serious, and you have to be willing to walk if the bank takes a hard line.

Just before Thanksgiving, Fannie Mae and Freddie Mac put a moratorium on new foreclosures until January 9. It's possible we'll see one more surge of inventory this month, and then President-elect Obama will take office with the biggest stimulus / bailout / foreclosure-prevention program in American history.

Whatever you think of conditions as they exist today - overvalued or undervalued - you're going to find out if you are right in 2009.

Is this your moment to catch an incredible deal? If you're an investor, do you like buying into the tightest rental market in a decade? If you're a first time buyer, do you like the idea of a $7,500 tax credit and foreclosures that are priced 20% or more off their 2004 peaks? And no matter where you're coming from, aren't 30-year fixed rates in the 5's ridiculously appealing?

In the end, we each have to make our own decisions about how, where and why we invest our money. But no matter what camp you fall in, the time to get educated is right now.